Honorable Robert Bunda

President of the Senate

Twenty-First State Legislature

Regular Session of 2001

State of Hawaii

Sir:

Your Committee on Commerce, Consumer Protection and Housing, to which was referred S.B. No. 1293 entitled:

begs leave to report as follows:

The purpose of this measure is to provide for rate relief for certain consumers of electricity.

The Department of Taxation testified in opposition to this measure. The Consumer Advocate, Tax Foundation of Hawaii, Kauai Island Utility Coop, and an individual submitted comments on the measure

Electric cooperatives are owned by the consumers they serve and are operated on a not-for-profit basis, providing electricity at cost to its owner-members. Cost savings realized by the cooperative are passed on to its members in the form of rate reductions.

This measure would enable electric cooperatives to reduce their operating expenses by exempting them from assessments for general excise and public service company taxes. In turn, cooperative members would enjoy lower electric rates.

Your Committee finds that the issue of granting tax exemptions to electric cooperatives raises concerns regarding the fiscal impact and fairness of an exemption, matters that merit further examination. Your Committee also notes there are currently no electric cooperatives in the State. Accordingly, your Committee has amended this measure by inserting an effective date of July 1, 2050, to facilitate ongoing discussions on this issue.

As affirmed by the record of votes of the members of your Committee on Commerce, Consumer Protection and Housing that is attached to this report, your Committee is in accord with the intent and purpose of S.B. No. 1293, as amended herein, and recommends that it pass Second Reading in the form attached hereto as S.B. No. 1293, S.D. 1, and be referred to the Committee on Ways and Means.